ECON UN1105 Study Guide - Final Guide: Absolute Advantage, Autarky, Opportunity Cost
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The following table shows the hourly output produced by one unit of labor in each country:
? | Cloth | Wine |
Italy | 1/10 yd per hour | 1/12bl per hour |
France | 1/9 yd per hour | 1/5bl per hour |
? | Cloth | Wine |
Italy | yds | bl |
France | yds | bl |
Total | ? | ? |
?
Which country has a comparative advantage in wine? In clothing? Why?
Suppose that Italy has 11000 labor hours available and France has 15000 labor hours available. Further assume that, in autarky (closed to the rest of the world), Italy uses 5000 hours to produce cloth, and the rest to produce wine, while France uses 5000 hours to produce cloth. What are the outputs without specialization and trade (number of units)?
Suppose that the nations now alter their production patterns and engage in complete specialization in the goods in which they have a comparative advantage. What are the outputs? How much is gained from specialization?
? | Cloth | Wine |
Italy | yds | bl |
France | yds | bl |
Gains | ? | ? |
?